NOTE 5. TAXES

Income (loss) before income taxes by geography was as follows:

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The components of the provision for income taxes by taxing jurisdiction were as follows:

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A reconciliation of the statutory U.S. federal tax rate to the Company’s effective tax rate from continuing operations pursuant to the disclosure requirements of ASU 2023-09 for the year ended March 31, 2026 is as follows:

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A reconciliation of the statutory U.S. federal tax rate to the Company’s effective tax rate from continuing operations for the years ended March 31, 2025 and 2024, prior to the adoption of ASU 2023-09 is as follows:

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The provision for income taxes for the year ended March 31, 2026 was $215 million as compared to $184 million for the year ended March 31, 2025. The increase in income tax expense was primarily driven by the increase in unrecognized tax benefits and foreign taxes, partially offset by the release of valuation allowances. The provision for income taxes for the year ended March 31, 2025 was $184 million as compared to $172 million for the year ended March 31, 2024. The increase in income tax expense between 2024 and 2025 was primarily driven by an increase in pretax income.

The Company’s effective tax rate for the year ended March 31, 2026 was higher than the Company’s statutory tax rate primarily due to uncertain tax positions and taxes on foreign operations. The Company’s effective tax rate for the year ended March 31, 2025 was higher than the Company’s statutory tax rate primarily due to the Company’s pretax income in fiscal year 2025, compared to a pretax loss in fiscal year 2024. The Company’s effective tax rate for the year ended March 31, 2024 was lower (more negative) than the Company’s statutory tax rate primarily due to the Company’s pretax loss being significantly lower in fiscal year 2024 and current year losses not benefitted due to the existing valuation allowances. The Organization for Economic Cooperation and Development’s Pillar Two rules, effective beginning in fiscal year 2025, did not significantly affect the Company’s tax rate or cash flows for the years ending March 31, 2026 and 2025.

In July 2025, the U.S. government enacted new tax legislation that, among other things, made permanent items such as 100% bonus depreciation on certain fixed assets, immediate expensing of domestic research costs and an increased business interest expense limitation. It also included modifications to several international tax provisions. The Company has recorded no material incremental tax expense or benefit related to the legislation.

The following table summarizes the income taxes paid by jurisdiction, prepared in accordance with the disclosure requirements of ASU 2023-09, for the year ended March 31, 2026.

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The tax effects of temporary differences that give rise to significant portions of the deferred taxes were as follows:

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As of March 31, 2026, the Company had tax-effected U.S. and foreign net operating loss/credit carryforwards deferred tax assets of $676 million and $29 million, respectively. As of March 31, 2025, the Company had tax-effected U.S. and foreign net operating loss/credit carryforwards deferred tax assets of $520 million and $75 million, respectively. If not utilized, the U.S. state and foreign net operating loss carryforwards will begin to expire in 2027. The

U.S. federal net operating losses incurred post 2017 can be carried forward indefinitely. Certain of our acquired U.S. net operating losses and general business credits are subject to limitations under IRC Section 382 and will begin to expire in 2029.

The valuation allowances as of March 31, 2026 and 2025 were $782 million and $749 million, respectively. The increase in valuation allowances from March 31, 2025 to March 31, 2026 was $33 million. The change in valuation allowances primarily reflects an increase in the U.S. due to net operating losses and current-year tax credit carryforwards generated, which are not more likely than not to be realized, offset by the release and reduction in the valuation allowance for certain foreign jurisdictions resulting from the refinement of certain tax positions. Estimates of future taxable income could change, perhaps materially, which may require us to revise our assessment of the recoverability of the deferred tax asset at that time.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

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Liabilities related to unrecognized tax benefits for which the Company is liable are reported within the Consolidated Balance Sheet based upon tax authorities’ ability to assert the Company may be the primary obligor for historical taxes, among other factors.

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With limited exceptions, the Company is generally subject to income tax audits for tax years subsequent to Separation, including in the U.S., Germany, Japan and Spain. Pursuant to the terms of the Separation, any tax liabilities attributable to the tax period (or portion thereof) ending on or before November 3, 2021, are generally not the Company’s liability. During the year ended March 31, 2026, the Company recorded refinements to certain tax reserves related to prior periods based on new information obtained and updated analyses performed during the year, including evolving interpretations and assessments of technical tax matters. These adjustments reflect refinements to management’s prior estimates using information that was not reasonably knowable or readily accessible at the time the original amounts were recorded. While the Company does not expect material changes in unrecognized tax benefits within the next twelve months, this assessment could change subject to future developments such as the result of audit developments and settlement discussions. Interest and penalties related to income tax liabilities are included in income tax expense. During the year ended March 31, 2026, the Company recognized $7 million in interest expense and penalties. The Company had $24 million for interest and penalties accrued at March 31, 2026.

Pursuant to the terms of the Separation, there were certain tax refunds related to estimated tax payments and refundable value-added taxes for which we would have been required to reimburse our former Parent as the refunds were received, as well as certain tax benefits related to net operating losses that were transferred to the Company for which we would have been required to pay to our former Parent as the tax benefits were realized. In addition, our former Parent had obligations to indemnify the Company for tax liabilities attributable to tax periods (or portions thereof) ending on or before November 3, 2021. During fiscal year 2025, an agreement was executed with our former Parent that resolved, with limited exceptions, both parties’ obligations related to the Separation. The agreement did not have a material impact on the Company’s financial statements.

As of March 31, 2026, with the exception of a certain subsidiary’s earnings, the Company’s undistributed earnings were not indefinitely reinvested. Accordingly, the Company recorded a deferred tax liability of $7 million for the estimated taxes associated with the repatriation of these earnings. The Company intends to repatriate certain foreign earnings that have been taxed in the U.S. and undistributed earnings to the extent the foreign earnings are not restricted by local laws and can be accessed in a cost-effective manner. With respect to the undistributed earnings of a certain foreign subsidiary which are permanently reinvested, the Company estimates that the amount of the deferred tax liability

related to these earnings is approximately $22 million, although this amount could vary due to the complexity and variability of the assumptions required to assess the amount and timing of future repatriations.